from the doesn't-paypal-like-encryption? dept

There are way too many stories of Paypal unfairly and ridiculously cutting off services that rely on it as a payment mechanism, but here's yet another one. Mega, the cloud storage provider that is perhaps well-known for being Kim Dotcom's "comeback" act after the US government shut down Megaupload, has had its Paypal account cut off. The company claims that Paypal was pressured by Visa and Mastercard to cut it off:

Visa and MasterCard then pressured PayPal to cease providing payment services to MEGA.

MEGA provided extensive statistics and other evidence showing that MEGA's business is legitimate and legally compliant. After discussions that appeared to satisfy PayPal’s queries, MEGA authorised PayPal to share that material with Visa and MasterCard. Eventually PayPal made a non-negotiable decision to immediately terminate services to MEGA. PayPal has apologised for this situation and confirmed that MEGA management are upstanding and acting in good faith. PayPal acknowledged that the business is legitimate, but advised that a key concern was that MEGA has a unique model with its end-to-end encryption which leads to “unknowability of what is on the platform”.

MEGA has demonstrated that it is as compliant with its legal obligations as USA cloud storage services operated by Google, Microsoft, Apple, Dropbox, Box, Spideroak etc, but PayPal has advised that MEGA's "unique encryption model" presents an insurmountable difficulty.

That last line is particularly bizarre, given that if anyone recognizes the value of encryption it should be a freaking payments company. And, of course, Paypal can't know what's stored on any of those other platforms, so why is it being pressured to cut off Mega?

Mega's theory -- which is mostly reasonable -- is that because Mega was mistakenly listed in a report released by the "Digital Citizens Alliance" that insisted Mega was a rogue cyberlocker storing infringing content, that payment companies were told to cut it off. If true, this is problematic on multiple levels. The methodology of the report was absolutely ridiculous. Because most Mega files are stored privately (like any Dropbox or Box or Google Drive account), the researchers at NetNames have no idea what's actually being stored there or if it's being done perfectly legitimately. Instead, they found a few links to infringing works, and then extrapolated. That's just bad research practices.

Furthermore, the Digital Citizens Alliance is hardly an unbiased third party. It's an MPAA front group that was the key force in the MPAA's (now revealed) secret plan to have states attorneys general attack Google. Think the MPAA has reasons to try to go after any potential revenue source for Kim Dotcom? Remember, taking down Megaupload and winning in court against Dotcom was a key focus of the company since 2010 or so, and Dotcom recently noted that he's out of money and pleading with the court to release some of the funds seized by the government to continue to fight his case. The lawyers who represented him all along quit late last year when he ran out of money. It seems like the MPAA might have ulterior motives in naming Mega to that list, don't you think?

And, this all goes back to this dangerous effort by the White House a few years ago to set up these "voluntary agreements" in which payment companies would agree to cut off service to sites that the entertainment industry declared "bad." There's no due process. There's no adjudication. There's just one industry getting to declare websites it doesn't like as "bad" and all payment companies refusing to serve it. This seems like a pretty big problem.

from the correlation dept

As you may have heard, last night was the Oscars -- Hollywood's favorite back-patting celebration. However, as a recent study found, films that were nominated for Oscars saw the number of unauthorized downloads and streams surge, as people wanted to make sure they had seen these celebrated films. Films like American Sniper and Selma saw a massive increase in unauthorized downloads after being nominated. The company that did this study, Irdeto, argues that these unauthorized downloads represent a major loss for the films' producers -- but it seems like there's another explanation: the MPAA really ought to be targeting the Oscars for encouraging infringement.

After all, for the past few years, the MPAA has been on a rampage trying to blame other third parties, like Google, which Hollywood insists is leading to greater infringement -- and yet, here's pretty obvious proof of another "cause" of piracy. Sure, one could argue (as we have, many times) that the lack of authorized, legitimate versions of these offerings may be contributing to the unauthorized downloads -- but the MPAA has insisted over and over again that this isn't fair. So, we'll take the MPAA at its word, and assume that the real culprit is "the Oscars" itself. Clearly, it's time to get rid of that major promoter of piracy. Just a few weeks ago, we noted that nearly all of the Oscar-nominated films were quickly finding their way online (in HD format, no less), and it's pretty clear that there would be a lot less demand if they weren't nominated.

Sure, one might argue, that the more popular a film is, and the more attention it gets, the more piracy will be the result -- but, again, the MPAA angrily dismisses such claims, insisting that it must be other factors leading to piracy. And, from the Irdeto study, it certainly appears that one major factor is... the Oscars.

I expect that the legal geniuses at the MPAA are now huddling in a circle figuring out which Attorney General they can convince to front a legal assault on the Oscars -- and this will all come out in the next batch of hacked emails....

from the about-time dept

A few years ago, the major record labels finally started to realize that, perhaps, shoveling many millions of dollars to the RIAA was a waste of good money, and they severely cut back funds. You may have noticed that, while the RIAA had taken the lead on the copyright front in the first decade of the new century, over the past few years, it's been a lot quieter than the MPAA. It appears that the MPAA may be about to go through a similar transition. Just a few weeks ago, we pointed out that the MPAA seemed to be desperately trying to justify its existence by doubling down on ridiculous and misleading claims about "piracy" and "content theft" rather than actually helping studios adapt to the modern era. We also noted that MPAA boss Chris Dodd was on something of an apology tour after the MPAA was caught completely off guard by the Sony Hack and did basically nothing about it, seriously pissing off execs at Sony.

In a behind-the-scenes drama, the Sony Pictures chairman Michael Lynton last month told industry colleagues of a plan to withdraw from the movie trade organization, according to people who have been briefed on the discussions. He cited the organization's slow response and lack of public support in the aftermath of the attack on Sony and its film “The Interview,” as well as longstanding concerns about the cost and efficacy of the group.

While the MPAA convinced Sony to stay in, it appears that the major studios are thinking it's about time the MPAA shift its focus -- and tighten its belt a bit:

If adopted, their still emerging propositions might jolt the group into line with the new realities of a changing entertainment business. They might, for instance, open the association to new members and expand its interests to include television programs or digital content. They might also reduce the heavy annual contribution of more than $20 million that is required of each of the six member companies: Walt Disney, Warner Bros., Paramount Pictures, 20th Century Fox, Universal and Sony.

The report notes that they might even give up their super fancy DC headquarters (the "Jack Valenti Building") which is just blocks from the White House.

Of course, it's not entirely clear how the MPAA's focus will actually change. It wouldn't be surprising to find some studio execs still want to double down on backwards-thinking, anti-internet campaigns. But, at least some seem to recognize that Hollywood hasn't kept up with the times, and that's partly because the MPAA kept focusing them on the last war, rather than on updating for the internet era.

Kevin Tsujihara, the chief executive of Warner Bros., said he, like Mr. Dodd, welcomed an examination of the organization that would mirror a similar review of cost and mission at his company. “Now is as good a time as any” to look at fundamental questions, Mr. Tsujihara said in an interview. He added: “We haven’t, as an industry, evolved fast enough.”

And, as we've pointed out, it really seems bizarre that the MPAA spends so much on an entire "content protection" division. At least some of the studios appear to be questioning the value of that approach:

But those briefed on the position of several companies said virtually all the studios have chafed lately at the high cost of maintaining the M.P.A.A., along with its worldwide antipiracy and market access operations, particularly as Sony, Warner and others are cutting staff and costs.

Frankly, as we've argued for years, it would be great if the MPAA actually became a forward-looking organization that looked to help the industry adapt to the modern era. It appears the organization is going through an inevitable crisis after years of making bad bets. Hopefully, it recognizes that embracing the future, rather than fighting it, is the way forward.

from the why-do-they-even-bother? dept

Stan McCoy was, until recently, the lead negotiator on "intellectual property" for the US Trade Representative -- making him the main guy behind ACTA and the horrific intellectual property sections of the TPP and TTIP agreements. Then, last year, he jumped ship exactly where you'd expect him to go: becoming a lobbyist for the MPAA. McCoy, as we've noted, has a history of condescension and mocking towards anyone expressing concern for "the public," rather than "the industry" which pays his bills.

So, it should come as little surprise at all that, in his current role, he's out there trotting out more bogus claims that ignore reality, in order to push the agenda of his employer. In a blog post discussing his appearance on a panel in the UK, McCoy insists that he's busting the myth that there's piracy because the content isn't available from authorized sources:

We need to bust the myth that legal content is unavailable. Creative industries are tirelessly experimenting with new business models that deliver films, books, music, TV programs, newspapers, games and other creative works to consumers. In Europe, there are over 3,000 on-demand audio-visual services available to European citizens. According to a recent KPMG report, 86% of the most popular and highest quality films and television series are available across legal digital platforms to UK consumers.

Okay, so this is McCoy's attempt at mythbusting. And it fails, pretty miserably, as TorrentFreak's Ernesto showed with just a little bit of effort. He went and looked at the top 10 most downloaded films last week and busted McCoy's weak attempt at mythbusting:

Click through for TorrentFreak's clickable chart

And, of course the KPMG study that McCoy relies on is quite misleading as well, since it actually found that over 80% of the top movies are not available on Netflix, by far the most popular service. That means that if people actually wanted to see the movies they want, they face a fragmented, confusing market, in which they'd need to sign up for a bunch of different services with different limitations to actually see what they want.

In other words, despite the MPAA pretending otherwise again and again, it remains a simple fact that the lack of availability and convenience on authorized services has a difficult time competing with the availability and convenience of unauthorized offerings. The same thing has been true for well over a decade. The music industry has mostly figured this out, so why can't the movie industry?

Of course, what McCoy can't really say is the truth: the movie industry can't readily adapt because it will piss off the theaters. The recording industry couldn't more fully embrace the internet until the old record stores finally lost their power, and the studios are held back by the theaters nowadays. Of course, the MPAA could and probably should be trying to help transition to the future by pushing back against the theaters' outdated views and explaining to them how they can also easily compete with home viewing by providing a better in-theater experience. But that takes real work. Instead, the MPAA's focusing on "content protection" because that way it retains a reason to exist.

from the this-beer-is-not-yet-rated dept

The MPAA. Usually that's all I'd have to say and then we could all have good combo laugh/cry over exactly how cartoonishly dickish an organization could be. But now it's entered the realm of alcohol, where trademark silliness is all too prevalent. But if any of those previous stories looked petty, the pure petty stones on these MPAA folks will astound you. Yes, it has come to this: a craft brewery has been forced to change the name of its celebrated "Rated R" beer brand. This, people, is as stupid as it gets.

A few weeks ago the MPAA sent a cease and desist letter to Minneapolis beer brewery 612 Brew, who’re known for their tasty beers including the popular “Rated R” brand. The movie industry group pointed out that the company was using the “Rated R” trademark without permission and urged the beer maker to drop the name to avoid confusion.

Of course! Who could possibly deny how the confusion over whether I was drinking an R-rated movie or a beer might creep into my brain? Who also could possibly deny that the MPAA's "Rated R" trademark is something other than purely descriptive? I mean, it's not like the mark is, you know, describing the exact state of rating of the movie or anything, right? And, finally, really how different are the movie and beer-making industries? Aren't they essentially the same thing? Because if they aren't, then this really doesn't make any sense.

The brewery first responded to the demands by arguing that the Rated R name can be used as they clearly operate in a different industry. The MPAA wasn’t convinced though.

Imagine the look on the faces of the sweet folks making this wonderful alcohol when they were informed that the lawyers at the MPAA weren't convinced that the MPAA and a brewery were in different industries. I imagine it took the grace of god himself to keep embolisms from popping inside of their brains as they tried to process a claim so stupid.

And, yet, because the brewery is small and the MPAA is big, the name of the beer will be changed. This is how stupidity plus money can equal the good guy getting screwed out of his brand. The beer will continue on, of course, though under a different name: "unrated."

The brewery now has to hope that the “unrated” name won’t cause any headaches in the future. A quick search reveals that there’s an “unrated” trademark application in progress by a “yoga pants” outfit, so fingers crossed.

from the because-of-course dept

As we've mentioned in the past, every year for over a decade, Andy Baio scours the internet to see what Oscar-nominated movies have been put online (the answer is usually almost all of them). He started this back in 2004, when the MPAA laughably claimed that the very first "screener" copy of a nominated movie had been put online. Baio realized that it was hardly the first and there were many more. His latest analysis is up and it shows that, yet again, nearly all nominated movies are available. He's actually kept the details of every year's search in a big Google spreadsheet.

There are some interesting findings in the data, including that screener copies don't matter much any more. For years, the MPAA -- which still can't get over its piracy obsession -- insisted that screener leaks were a huge problem. Back in 2003 the MPAA wanted to ban screener DVDs entirely, which pissed off a bunch of filmmakers who feared that their films wouldn't get voted on for the Oscars. Since then, they've focused on ridiculous proprietary systems that would only play on special DVD players -- which just pissed off viewers. In the last few years, they've just focused on watermarked DVDs, which means that when the videos inevitably leak, they can be tracked back to whose copy leaked -- like Ellen Degeneris' copies last year.

But here’s the thing: screeners are stuck in the last decade. While we’re all streaming HD movies from iTunes or Netflix, the movie studios almost universally send screeners by mail on DVDs, which is forever stuck in low-resolution standard-definition quality. A small handful are sent in higher-definition Blu-ray.

This year, one Academy member received 68 screeners — 59 on DVD and only eight on Blu-ray. Only 13% of screeners were sent to voters in HD quality.

As a result, virtually any HD source is more prestigious than a DVD screener. And with the shift to online distribution, there’s an increasing supply of possible HD sources to draw from before screeners are ever sent to voters.

And of course, the data also shows that cammed copies (someone sitting in a theater with a camera filming it) are virtually non-existent here. This is another issue that we've covered for years, with the MPAA famously making up numbers out of thin air concerning how big a "problem" it was. But, of course, the quality on those copies suck, and so people focus on HD, which they inevitably get.

Of this year’s 36 nominated films, 34 already leaked online in some form — everything except Song of the Sea and Glen Campbell: I’ll Be Me.

But only 33% of those were leaked from screeners, down from a high of 89% in 2003 and 2004.

As he notes, with the MPAA stupidly focused on screeners, they think they're winning the battle, because here's the percentage of actual screeners leaked:

So, I'm sure the content protection team at the MPAA are all excited about this. They're vanquishing the screener piracy monster. But as Baio points out, that's bullshit, because just as many films are leaking, but in HD quality from HD sources instead of screeners:

While this year's figure is currently 89%, there's a decent chance it will go higher before the Oscars happen. As Baio notes, 44% of the films this year are HD sources, not from screeners or from retail releases.

In other words: all this effort from the "content protection" team at the MPAA yields absolutely no benefit at all.

from the shirky-principle dept

In the past we've discussed the Shirky Principle, named after a statement by Clay Shirky that:

"Institutions will try to preserve the problem to which they are the solution."

In some ways that's a corollary to Upton Sinclair's famous quote:

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

I've long believed that the MPAA has this problem in spades. The group, which is supposed to be about helping the big Hollywood studios, has long taken a very different positions. Five years ago, we wrote about how bizarre it was that the MPAA had an entire "Content Protection" division. As we noted at the time, the organization not only had a Chief Content Protection Officer, but also an Executive VP of Content Protection, a Senior VP of Content Protection and a regular VP of Content Protection, and probably a handful of Content Protection Minions or whatever they call their non-VP worker bees.

And yet, there didn't seem to be anyone at the MPAA who had a title along the lines of "Chief Open Internet Evangelist" or "Chief Digital Business Model Strategist" or something along those lines, who could have been working with Hollywood to help transition the organization into the digital age. No, instead that transition has come in fits and starts with the MPAA itself fighting against most of the key moves and doing little to help forward thinking filmmakers and studios. In fact, if you talk to many of the up-and-coming filmmakers these days, they're just as angry about the MPAA's stance as open internet supporters -- because they realize just how counterproductive a "protection" regime is, rather than a "embrace the opportunity" regime would be.

Eli Dourado has written up a fantastic discussion of this very idea, by focusing on two key things that came out of the Sony Hack that, together, more or less highlight the point above: that the MPAA is not pro-Hollywood at all, but rather seems entirely focused on "giving itself a reason to exist, rather than solving the film industry's" challenges. Specifically he highlights these two things:

Leaked emails revealed the Motion Picture Association of America’s ongoing plans to censor the Internet to reduce digital film piracy.

The hack prompted a surprise, online Christmas Eve release of The Interview that let us observe the effect of a new distribution model on film revenue.

We have, of course, covered both of these, but Dourado puts them together nicely in context, showing how the MPAA's site-blocking/filtering/censorship strategy is one focused on destroying many of the opportunities of the internet, while the digital release of The Interview showed how embracing digital can actually be quite useful for Hollywood -- not that the MPAA wants anything to do with that at all.

When put together, these vignettes raise important questions about the future of the film industry and its lobbying efforts. Is the MPAA really representing Hollywood’s long-term interests in Washington, or is it trying to fight old battles over and over in an attempt to justify its own existence?

Dourado goes through the detailed history -- revealed by the Sony Hack -- of how, post-SOPA, the MPAA has regrouped to focus on ways to bring back site-blocking and censorship online, while simultaneously attacking Google at every turn (even when Google did exactly what the MPAA asked for and demoted sites the MPAA dislikes). As Dourado notes:

But the more striking point is what this strategy reveals about the MPAA: the organization still deeply believes in site blocking as more or less the solution to online piracy. It continues to position itself as an enemy of the open Internet.

From there, he discusses the success of the online release of The Interview, pointing out how well it did. Of course, some of that may have been because of all the (somewhat questionable) news about the supposed threat from North Korea, leading some to choose to watch it for patriotic reasons. Still, Dourado notes that, while there was piracy of the film as well, much of it came outside the US, because Sony initially limited the release to US only online. And the movie did make a fair bit of money online and, perhaps more importantly, got people to pay attention to its online efforts:

There is additional evidence that the online release was a win for Sony: its YouTube channel gained 243,000 new subscribers in the aftermath of the Interview release. As YouTube entrepreneurs like Michelle Phan would note, subscribers are as good as cash, a ready source of revenue for future online movie releases, if Sony decides to do more of them.

The Interview episode shows that the Internet need not be viewed only as a source of piracy. With a modest change in business model, it can also be the film industry’s next great distribution platform.

And then you get to the divergence question: which strategy is best for Hollywood and the film industry... and which strategy is best for the MPAA? Take a wild guess:

What is the best strategy for the film industry going forward? Should it continue to fight the open Internet, as it did with SOPA, and as it has continued to do through state AG investigations and lobbying the ITC? Or should it embrace the Internet as a potentially profitable distribution platform that is in any case here to stay?

It’s clear which strategy the MPAA, the lobbying organization, prefers. If the studios were to truly embrace the Internet, the MPAA would have a much diminished reason for existence. There is no one you need to lobby in order to release films online. Many employees, such as chairman Chris Dodd and general counsel Steven Fabrizio, would have little to do. The organization would have to go back to administering its film ratings system and asking states for ridiculous film tax credits.

He goes even further, pointing out that this stupid focus on "content protection" has been shown time and time again not to work, whereas embracing the internet seems much more likely to work. But, of course, it would leave the MPAA with less things to do. And thus, to me, it goes all the way back around to the Shirky Principle. The MPAA has to keep focusing on "the piracy problem" because it has set itself up as "the solution" to that problem, perhaps knowing full well that it's a solution that can never be solved. Yet, because of this, it guarantees a large role for itself, convincing gullible studio bosses to keep forking money over to the MPAA, so that its leadership can keep earning multi-million dollar salaries.

The real issue here is that, as younger, more internet-savvy filmmakers continue to bubble up throughout Hollywood, sooner or later more of them are going to realize what a farce the MPAA has become. And just like the MPAA's "content protection" strategy has totally failed Hollywood, eventually it's going to totally fail itself as well. That's what you get for fighting the future, rather than embracing it.

from the bigger-and-better-is-bad dept

We're getting close to the two-year anniversary of the Center for Copyright Information's (CCI) "six strikes" anti-piracy regime. The program, with cooperation from the biggest ISPs, involves forwarding on copyright infringement notices to consumers and punishing users via a "graduated response" program. Said responses vary by ISP but can include a user being temporarily locked behind a walled garden filter until they acknowledge receipt of one-sided "educational" materials, or having your connection throttled temporarily until you admit you've been naughty. If innocent, you have to pay a $35 fine to defend yourself.

While the program might seem effective in scaring little Billy straight once his parents notice their connection doesn't work, it clearly hasn't had much of a meaningful impact on piracy rates. Unsurprisingly, the entertainment industry argues this is because the measures don't go far enough; nobody tracks offenders between ISPs, absolutely nothing happens to a user that violates all six strikes (the program simply stops and no more notifications are sent) and most users can simply hide their behavior behind the use of BitTorrent proxy services.

That hasn't stopped CCI from frequently trumpeting six strikes as a smashing success, often using unreliable, contradictory evidence (when it can be bothered to show evidence at all) to support their argument that forcing ISPs into the role of content nannies is a great idea. Privately however, newly leaked MPAA documents suggest the entertainment industry isn't so sure six strikes is doing much of anything.

The leaked documents show the program isn't having quite the impact the MPAA would like, though again, unsurprisingly, the MPAA believes that's only because the program isn't big enough yet. While there's the occasional attempt to suggest that offenders change their ways after receiving notices, the document then proceeds to note the MPAA actually has no idea if people change their behavior, since it's possible they switched ISPs or are hiding their behavior via BitTorrent proxy services:

"The U.S. system is “not yet at scale” or operating with “enough education support” according to the MPAA. As a result the CAS has not made an “impact on the overall [piracy] landscape...“No current information as to the behavior of users who appear to stop P2P infringement – do not know whether [they are] migrating to other pirate systems or to lawful services,” the statement reads."

The MPAA's solution to this problem? Make Six Strikes bigger, bolder and thereby worse:

"Attainability as to existing programs boils down to whether ISPs will agree (a) to expand scale to levels that might impact overall P2P piracy, and (b) to enhance remedial measures so as to improve efficacy,” the MPAA writes."

I've spoken to execs at two large ISPs who have admitted privately they know most pirates have simply started using proxy services, but the ISPs are playing along begrudgingly. Already a bit put off by the added paperwork, few are going to be keen on an a voluntary expansion of the program. As such, look for the entertainment industry to lobby heavily to have this year's rewrite of the Communications Act include numerous new treasures aimed at ISP compliance of a plan expansion. Perhaps after that we can proceed to banning the use of VPNs and proxies entirely for the good of the nation?

from the google-is-not-going-to-block-yahoo-and-linkedin dept

A few weeks ago, we wrote about how bizarre it was that the MPAA was so focused on attacking Google and forcing it to take entire sites out of its index when it didn't seem to understand these issues in the slightest. As a part of that, we highlighted how pointless the plan was, because if you looked for a domain after it was removed (which we mocked up by using the "-" modifier), you just ended up getting other people telling you how to get the same kind of content anyway. And yet, the MPAA keeps pushing for Google to further push down or delete entire sites. And, of course, Google continues to give in anyway, giving the industry what it wants. A few months ago it ratcheted up the demotion-for-DMCA-notices aspect of its algorithm, and a bunch of sites have effectively disappeared.

But does it really make a difference? As we discussed, one immediate result of this was that people who were searching for free downloads often came across more sketchy sites (which, perhaps, the MPAA doesn't much care about). But, it's also having a secondary effect -- which is that it's showing how perfectly legitimate websites are also being used to tell people how to access content for free (usually in unauthorized ways).

If you can't see it, you'll note that many of the links to free (and most likely unauthorized) versions are from well established sites. The top one is to Facebook. The third slot is Linkedin. Towards the bottom is Tumblr. It's very likely that all these links going to infringing/unauthorized copies of the film. Yet they're on popular sites -- the kinds of sites that Google isn't going to suddenly remove from search or seriously downrank due to DMCA notices because -- and, on this, hopefully everyone can agree -- there's an awful lot of perfectly legitimate content on sites like those.

This isn't, of course, to point out how to access that movie for free, but to highlight, yet again, just how completely pointless the MPAA's preferred course of action is. It's as if no one at the MPAA has ever played chess and realized that thinking more than one move ahead might help. Each time the MPAA demands something silly and pointless, it doesn't help because what Google is doing is not "leading people to piracy." It's leading people to what they're looking for. And if what the people are looking for happens to be free copies of movies, then that's what they're going to find eventually. The way to solve that is not to stupidly go after Google and demand it downrank certain sites (which just means others will replace them), but to better offer people what they want from authorized sources so that when people go looking, the content creators and/or copyright holders are the ones who get the benefit.

In other words, just as we've been saying for over a decade, the proper response is to innovate, rather than to sit around and blame everyone else for not protecting your obsolete business model.

from the to-stop-pirates,-sometimes-you've-got-to-break-a-few-internets dept

When SOPA died its inglorious death, the MPAA's best shot at ISP-level site blocking died with it. But the MPAA is nothing if not stubborn and is still willing to wreak havoc on the internet in exchange for a slight dip in infringement.

According to a leaked document from the MPAA's law firm [pdf link] and two publicfilings in support of the International Trade Commission (sent over by Charles Duan of Public Knowledge), the movie industry is hoping to use the agency's new willingness to regulate digital transmissions like physical goods as a foundation for site blocking.

As we've discussed for years, the ITC has been an active player in helping US patent holders go after those they believe are infringing. Generally, this has taken the form of blocking imports of infringing physical goods -- that the ITC deems as infringing (using different rules than the US court system). This has often allowed patent holders two separate bites at the apple -- one in the courts, and one at the ITC. But a recent case saw the ITC shift its focus -- and its purview -- in response to some circuitous patent infringement. Russell Brandon at the Verge details the case that has led to the MPAA's next attempt at site blocking.

The heart of the case is a company called ClearCorrect, which 3D prints clear plastic braces custom-designed for each patient's teeth. Much of the technology involved in the process is already under patent, but ClearCorrect has gotten around those patents by farming out its intricate computer modeling to an office in Pakistan. That modeling violates a number of US patents — and if ClearCorrect were shipping back the resulting braces in a box, it would be a simple case: the goods would be contraband, to be stopped at the border. But instead, ClearCorrect is only transmitting digital models from Pakistan and printing out the braces in local offices in Texas. The only thing coming in from Pakistan is raw modeling data. So what's a trade commission to do?

In the sweeping and unprecedented decision below, the International Trade Commission found that its authority to regulate trade extends to pure "electronic transmission of digital data" untied to any physical medium. Generally, by statute, the Commission's jurisdiction is limited to oversight of "importation . . . of articles." However, the Commission expansively construed the term "articles" to potentially include anything "bought and sold in commerce," thereby leading to its conclusion that digital data was an article of importation.

The MPAA, which has entered comments in favor of the ITC's self-granted power expansion, wants to use the agency's power over digital imports to block websites at the ISP level. The leaked Jenner & Block memo confirms this. The MPAA's lawyers don't consider it a slam dunk but they are cautiously hopeful that the ITC's land grab will pay off.

As discussed in the 2012 ITC Memo, seeking a site-blocking order in the ITC would appear to offer a number of advantages over federal court litigation, at least at first blush. This now seems even more so given the ITC’s recent decision (albeit now on appeal) holding that electronic transmissions are “articles” within the meaning of Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337. As also discussed in the 2012 ITC Memo, however, such an action would still involve several difficult questions of first impression, making the prospect of success in that forum uncertain.

While the ITC's new aim -- stopping infringing digital files at the "border" -- would seem to be the ideal starting point, the memo points out that many technical limitations make this approach less than feasible. The "transit" ISPs -- those that "ship in" data from other countries -- can be handled more easily by other court orders than by ITC regulation. The ITC's purview only covers inbound traffic, and technical limitations make this a weaker approach. For one, the lack of information on incoming packets means the blocks would only affect IP addresses. If a "pirate site" shares an IP address with another site, the block won't work. And IP addresses could easily be shared to circumvent blocking at transit ISP level.

The memo also notes that the internet is designed to flow around obstructions. Applying blocks at the transit level would simply shift infringing loads to other pathways, nullifying the blocks altogether.

The law firm then addresses blocking outbound traffic to infringing sites at the ISP level. This would ignore the inbound traffic of "transit" ISPs and demand action be taken by US ISPs.

Even though site blocking by transit ISPs may be impractical in most (and likely all) cases, it may still be possible for the ITC to issue orders to the consumer-facing network access ISPs requiring them to cease and desist from providing their subscribers with access to the pirate site. To do so, however, the ITC would first have to find that the network access ISPs, by providing their subscribers with access to the pirate site, have themselves violated Section 337.

That's the sales pitch for ISP-level site blocking. It somewhat ignores the new powers of the ITC and instead relies on convincing the agency that access to "pirate sites" -- even as a "dumb pipe" -- is a violation of Section 337. Definitions will need to be stretched and ISPs that allow their customers to roam the web freely will need to be painted as contributors to infringing activity.

Because it is the transit ISPs and not the network access ISPs that actually carry the infringing data across the border, we would need to persuade the ITC that the network access ISPs’ conduct is also tantamount to “importation into the United States” of copyright-infringing articles... For this reason, we may be able to develop a case that the network access ISPs, by virtue of the integral role that they play in the process of accessing and delivering infringing content from the foreign site to the end user, should be treated as an importer for purposes of Section 337.

If that doesn't work, the next argument is to portray the ISPs as involved in the sale of counterfeit goods.

Even if we cannot persuade the ITC that network access ISPs are “importers” of the infringing articles, it can plausibly be argued that the network access ISPs are engaged in a post-importation “sale” of the infringing articles to their end-user subscribers, in violation of Section 337. See 19 U.S.C. §1337(a)(1)(B) (providing that “sale after importation into the United States” is an unlawful act). The difficult question presented here is whether an ISP, by providing network access in exchange for its subscribers’ payment, can be found to have engaged in the “sale” of the infringing articles as that term is used in Section 337.

The arguments don't get any less ridiculous. There's a pitch for ISPs to have participated in "unfair acts" by "forcing" (read: allowed customers to access sites the MPAA doesn't like) the motion picture industry to "compete" against infringing copies of its own works. There's even a small paragraph that pushes the notion of contributory infringement, although the law firm notes that this would be the longest shot of all. The likeliest approach appears to be the use of the ITC's power to obtain cease-and-desist orders against ISPs, forbidding them from allowing access to "pirate" sites.

Public Knowledge's brief [pdf link] in opposition to the ITC's pending power shift points out that even though the statute itself is old (Tariff Act of 1930), its authors directly contemplated the difference between physical and more ethereal goods -- and made it clear that the two shouldn't be treated identically.

Evidence from the early 1900s indicates that Congress and others would have cleanly distinguished importation and telecommunication, vesting authority over each in distinct agencies. Treating the Commission as having authority over telecommunications data, then, conflicts with this distinction. To the extent that the Commission’s interpretation of “digital data” as an imported article encompasses such telecommunications data, this Court should reject that erroneous interpretation of the Commission’s purview.

[...]

There is substantial evidence that, around 1930, data transmissions were generally understood to be distinct from articles of commerce and international trade. This understanding influenced Congress, as reflected in its creation of separate and distinct agencies to oversee trade and telecommunications.

The distinction was highlighted by the Supreme Court as early as 1887, in considering one specific type of telecommunications data, namely telegrams:

Other commerce deals only with persons, or with visible and tangible things. But the telegraph transports nothing visible and tangible; it carries only ideas, wishes, orders, and intelligence. Other commerce requires the constant attention and supervision of the carrier for the safety of the persons and property carried. The message of the telegraph passes at once beyond the control of the sender, and reaches the office to which it is sent instantaneously. It is plain, from these essentially different characteristics, that the regulations suitable for one of these kinds of commerce would be entirely inapplicable to the other.

The brief also points out that, while the ITC is correct in noting that internet transmissions couldn't possibly have been envisioned during the crafting of the 1930 Tariff Act, similar "articles" like telecommunications and radio signals had already been discussed by Congress, and each time, these were not allowed to fall under the same regulatory agency.

Putting the ITC in charge of digital transmissions will turn ISPs into ad hoc customs agents who need to inspect incoming packets and outgoing requests. Cloud services would also be negatively affected, as load balancing would need to be rebuilt from the ground up in order to accommodate the legal concerns now inherent in every transmission. The DMCA safe harbor would no longer exist, forcing ISPs to stay one step ahead of IP holders, building in anticipatory takedown response systems and choke points. The MPAA still wants site blocks and is still willing to break the internet to get them. Even the cautiousness displayed in the legal memo still glosses over the severe disruptions this use of the ITC's new powers will cause.

The good news? The ITC's "digital = physical" shift isn't in effect yet. The case prompting this shift is still under appeal and no decision is expected until late 2015. Chances are, this decision will be appealed as well, likely landing it in front of the Supreme Court sometime in the next few years. The MPAA can't move on its arguments until this is all decided. But it's ready to move as soon as it can, and this isn't its only plan of attack.